April 10, 2019

OSFI released the final version of its Guideline B-2 on large exposure limits for domestic systemically important banks (D-SIBs), with an effective date of November 01, 2019. OSFI also published the guideline impact analysis statement. The Canadian D-SIBs are expected to implement the final version of this guideline in the first quarter of 2020. The consultation on the guideline took place from December 2018 to February 2019. OSFI has issued a summary of comments received and explained how the comments have been addressed in the final guideline.

The new version of Guideline B-2 includes the following:

  • Introduces tighter limits for exposures to both global systemically important banks (G-SIBs) and to other Canadian D-SIBs
  • Recognizes eligible credit risk mitigation techniques by measuring exposure on a net basis rather than on a gross basis
  • Reduces the eligible capital base from total capital to tier 1 capital

The guideline, which was originally issued in 1994, establishes limits for the exposure of a bank to a single counterparty (including connected counterparties), measured as a percentage of capital. In 2014, BCBS published its standard on large exposure risk management. The final guideline of OSFI incorporates the BCBS guidance to reflect current risk management sound practices and provides additional guidance on the methods that OSFI expects D-SIBs to use for identifying, measuring, managing and monitoring large exposures.

 

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Effective Date: November 01, 2019

Keywords: Americas, Canada, Banking, Large Exposures, Basel III, D-SIBs, Concentration Risk, Guideline B-2, OSFI

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